Big blue trips up Twitter

Last Updated: Thursday 11 June 2015

If Twitter thought it was immune, it has come in for a rude shock. The social networking and micro-blogging service has been hit by the common complaint afflicting all companies using software programmes: a notice that it has violated patents. The complaint has been filed by none other than Big Blue as IBM, the US-based global technology company, is known as. It invariably heads the annual list of top patent owners in the US.

As Twitter heads for its initial public offering (IPO) that is expected to rake in at least $1.81 billion, it has disclosed that IBM has put it on notice about three patent infringements: one that covers “efficient retrieval of uniform resource locators”, another for a “method for presenting advertising in an interactive service” and the last for “programmatic discovery of common contacts”. Big Blue has not filed a lawsuit as yet and those familiar with the workings of the global giant say it will expect to be paid licence fees by Twitter in an out-of court settlement.

IBM has in the past sued other companies and in a similar situation, and some intellectual property (IP) analysts believe IBM is seeking either a payout or a stock deal. History: it had sold as many as 750 patents to Facebook just when it had floated its IPO, they claim. Although supporters say Twitter will not give in, the company in its mandatory filing with the Securities and Exchange Commission is not so sanguine. On a preliminary review of these patents, Twitter says, “we believe we have meritorious defenses to IBM’s allegations, although there can be no assurance that we will be successful in defending against these allegations or reaching a business resolution that is satisfactory to us”.

The background to these patents is as curious as the system that allows it. Patents normally grant owners a 20-year monopoly, but in the case of IBM, patents seem to have endless life. The patents were issued in 2006, but the applications date from the 1980s under a process known as “continuation” that allows owners to refine and expand their claims by maintaining the priority date that identifies them as the first inventor. For instance, the claim for “presenting advertising in an interactive service” was filed in 1993 on the basis of a 1988 application.

Twitter should know who it is taking on if it decides to contest IBM’s claims. Big Blue’s patent licensing reportedly fetches it a yearly revenue of over $1 billion, a return that allows it to pump in around $6 billion in R&D annually. Twitter, on the other hand, is in a curious position for a company of its kind. It has very few patents of its own (just nine, with 95 applications pending) compared to the sackfuls that Google and Facebook boast of. Twitter not only went against conventional wisdom that dictates stocking up on patents before going for an IPO but it also cheered the tech community by putting in place a policy, the Innovators Protection Agreement (IPA), that gives its inventors the final say in how Twitter patents can be used in the future. Quite a daring path to tread since it will allow employees to develop such technologies for rival companies. In such an event, concedes Twitter, it would be limited in its ability to assert a patent right against another company, and would instead have to rely on trade secret protection or the contractual obligation of the inventor not to disclose or use confidential information.

Besides, the terms of IPA would come in the way of the company’s ability to monetise its IP portfolio.

This is a refreshing approach in an industry that is routinely fighting thousands of patent suits, involving every name from Apple and Microsoft to little-known startups. To help industry come out of the quagmire of software patents, the US is debating the Innovation Act (HR 3309), a patent litigation reform measure sponsored by the chairperson of the House Judiciary Committee and supported by 10 other members, both the Democrats and Republicans. The primary aim is to end the problem of abusive litigation practices and help rid the patent system of expensive and wasteful lawsuits.

There are two major reasons why patent litigation is running amok in the US. One, software patents are overly broad or vague in nature resulting in poorly defined property rights. The other reason is litigation costs: the burden falls disproportionately on defendants, encouraging patent holders to sue and conversely forcing defendants to settle even if the infringement claim has little merit.

Such is the mess that Twitter, too, has been sucked in. It is already involved in a number of lawsuits, and is bracing itself for more. As the company notes, it has no way of knowing whether its products and services are not infringing IP rights held by others and that any claim or litigation alleging infringement of IP rights, with or without merit, would be time-consuming and costly to address. Expect some tweets on this.

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Patent litigation is not

Patent litigation is not "running amok". Most of the increases in patent litigation since 2006 are side effects of previous ill-conceived attempts to reduce it. Because it's now harder for inventors to enforce patents, patents are sold to enforcement companies that enforce them in bulk. This is why, after 200 years of patents, we now have "patent trolls".

HR 3309 won't affect IBM vs Twitter. Both can afford expensive lawyers. HR 3309 is a way to keep the little guy from enforcing patents against big guys. The push for HR 3309 comes from the American Association of Advertising Agencies and the Direct Marketing Association (the junk mail people), who are having some problems with some patents on online and mobile ad systems. This is mostly about four specific patents. It's not about technology; it's all about ads.

The problem with continuation applications and "submarine patents" is an old problem. It was fixed two years ago, with the America Invents Act, and that trick doesn't work any more. There are still some old pending "submarine patent" applications, but no new ones.

This knee-jerk reaction to claims of "patent trolling" is getting to be a problem.

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